A restaurant company behind Outback Steakhouse, Carrabba's Italian Grill, Bonefish Grill, and Fleming's Prime Steakhouse, serving casual to fine dining across the U.S. and in dozens of other countries. Outback was founded in Tampa in 1988 by four hospitality veterans who picked an Australian theme despite none having been there. The famous Bloomin' Onion was created by co-founder Tim Gannon, who borrowed the idea from a New Orleans fried-onion dish.
Restaurant margins expanded 40 bps to 12.4% as pricing and productivity offset commodity inflation, while U.S. traffic fell 1.9%.
Restaurant-level profitability improved for the first time in over a year. rose 1.3% to $1,015.8 million and expanded 0.8 points to 3.8%, driven by a 2.3% increase in U.S. from menu pricing and cost-saving initiatives that more than offset a 1.9% traffic decline. The turnaround strategy is showing early traction in margins, but customer counts are still falling.
Key takeaways
Restaurant-level expanded 40 to 12.4%, as labor and other operating costs leveraged on higher pricing and productivity savings, partially offsetting a 40-basis-point increase in food and beverage costs from 1.6% commodity inflation.
U.S. combined rose 2.3%, the strongest reading in at least two years, driven entirely by a 4.2% increase in average check per person; traffic declined 1.9%, an improvement from the 3.5% drop a year ago.
Section summaries
Management's Discussion and Analysis
Q2 2026 U.S. comparable sales rose 2.3% driven by pricing; operating margin improved to 3.8% despite commodity and wage inflation.
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Total revenues increased 1.3% to $998.0 million, with U.S. up 2.3% on a 4.2% higher average check, offsetting a 1.9% traffic decline.
expanded 40 to 12.4%, as labor and other operating costs leveraged on higher pricing and productivity savings, partially offset by commodity inflation.
rose 29.0% to $38.3 million, and expanded 0.8 points to 3.8%, as the stabilization of restaurant-level costs and lower general and administrative expenses flowed through to the consolidated result.
General and administrative expense fell to 5.3% of total revenues from 5.9% a year ago, primarily because the prior-year quarter included transformational and restructuring costs that did not recur.
rose to $46.9 million from $11.1 million a year ago, as higher and lower under the turnaround strategy improved cash generation.
fell 23.4% to $702.8 million, and liquidity remained supported by $774.2 million in available borrowing capacity on the .
What changed
Restaurant-level , which had contracted to 9.2% in Q3 2025 and stood at 12.0% a year ago, expanded to 12.4% this quarter — the first expansion since at least Q1 2024, indicating that pricing and productivity savings are beginning to outpace commodity and wage inflation.
U.S. traffic declines continued to moderate: the 1.9% drop this quarter compares with a 3.5% decline in Q2 2025 and a 2.8% decline in Q3 2025, suggesting the erosion in customer counts is slowing as the company laps prior-year pricing actions.
The Outback Steakhouse and trade name risk flagged in prior quarters remains, with the fair value cushion at approximately 10% above carrying value; no new impairment was recorded this quarter, but the risk has not receded.
The Out West franchisee forbearance agreement, covering 74 Outback Steakhouse restaurants and expiring in December 2026, remains unresolved and continues to carry contingent lease liabilities if the franchisee defaults.
What to watch
Whether restaurant-level , now at 12.4%, can sustain or build on this expansion as the 4.5%–5.5% commodity inflation expected for 2026 continues to flow through and the Outback remodel program progresses.
Whether U.S. traffic declines, which moderated to 1.9% this quarter, continue to improve or reverse as the company laps the 4.2% average check increase and the turnaround strategy shifts focus to existing restaurant performance.
The outcome of the next and trade name test for Outback Steakhouse, where the fair value cushion remains approximately 10% above carrying value and any deterioration in operating assumptions could trigger a non-cash charge.
The resolution of the Out West franchisee forbearance agreement expiring in December 2026, which covers 74 Outback Steakhouse restaurants and carries contingent lease liabilities if the franchisee defaults.
Food and beverage costs rose 40 to 30.7% of restaurant sales, driven by 1.6% commodity inflation, partly mitigated by 1.4% from menu pricing.
General and administrative expense fell to 5.3% of total revenues from 5.9%, primarily due to lapping prior-year transformational and restructuring costs.
Liquidity remains solid with $774.2 million available on the ; 2026 are projected at $185–$195 million, focused on the turnaround strategy.
Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risk from changes in commodity prices, labor inflation, foreign currency exchange rates and interest rates. We believe that there have been no material changes in our market risk since December 28, 2025. See Part II, Item 7A., “Quantitative and Qualitati…
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We are exposed to market risk from changes in commodity prices, labor inflation, foreign currency exchange rates and interest rates. We believe that there have been no material changes in our market risk since December 28, 2025. See Part II, Item 7A., “Quantitative and Qualitative Disclosures about Market Risk,” in our Annual Report on Form 10-K for the year ended December 28, 2025 for further information regarding market risk.
For a description of our legal proceedings, see Note 13 - Commitments and Contingencies of the Notes to Consolidated Financial Statements of this Quarterly Report on Form 10-Q.
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For a description of our legal proceedings, see Note 13 - Commitments and Contingencies of the Notes to Consolidated Financial Statements of this Quarterly Report on Form 10-Q.
In addition to the other information discussed in this report, please consider the factors described in Part I, Item 1A., “Risk Factors,” in our 2025 Form 10-K which could materially affect our business, financial condition or future results. There have not been any material cha…
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In addition to the other information discussed in this report, please consider the factors described in Part I, Item 1A., “Risk Factors,” in our 2025 Form 10-K which could materially affect our business, financial condition or future results. There have not been any material changes to the risk factors described in our 2025 Form 10-K, but these are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may adversely affect our business, financial condition or operating results.